New Public Disclosure Requirements For Canadian Life Insurers

Article by Carol Lyons

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In Canada, the Office of the Superintendent of Financial Institutions (“OSFI“), is the federal regulatory authority over life insurers. On March 29, 2018, OSFI published its final version of a new guideline entitled Life Insurance Capital Adequacy Test Public Disclosure Requirements (the “Disclosure Guideline“).  The final version follows OSFI’s usual public consultation period during which insurers and other stakeholders were given the opportunity to provide comments and suggestions.

New LICAT Guideline

The disclosure requirements in the Disclosure Guideline go hand in hand with OSFI’s new Life Insurance Capital Adequacy Test (LICAT) guideline for 2018 (the “LICAT Guideline“) which came into effect on January 1, 2018.  The LICAT Guideline resulted from a recent overhaul of the prior Minimum Continuing Capital and Surplus Requirement (MCCSR) guideline for life insurers. The LICAT Guideline contains two different tests: simply put, a capital adequacy test (LICAT) for Canadian-incorporated life insurers and an adequacy of margin and assets test (LIMAT) that applies to foreign life insurance branches operating in Canada. The LICAT/LIMAT requirements establish standards used by OSFI to assess whether Canadian-regulated life insurers maintain adequate capital or an adequate margin to support risks specific to the life insurance business.  In other words, these requirements essentially comprise OSFI’s solvency tests for life insurers.

Disclosure Guideline

OSFI had previously announced that once the new LICAT/LIMAT requirements came into effect, it intended to promote enhancements to the regulatory framework for life insurers through information disclosures to support the revised regulatory capital/assets requirements.  The new disclosure requirements contained in the Disclosure Guideline are the result of this stated intention.

The Disclosure Guideline provides that the first LICAT public disclosure reporting period will be the year ended December 31, 2018, and that for the first year OSFI expects life insurers to apply the disclosure requirements prospectively with comparative period disclosures in subsequent reporting periods.  The disclosure is to be made on an annual basis, coinciding with the timing of the insurer’s annual report.  Insurers are to make the disclosures publically available on their websites, maintaining archives of previous disclosures.

The Disclosure Guideline states that the information disclosed should undergo the same scrutiny as the internal review and control process that applies to the insurer’s financial reporting.  According to OSFI, the internal audit function (or similar review function for the insurer) should confirm the company’s compliance with the Disclosure Guideline, both initially and subsequently on a periodic basis.

Guiding Principles

The Disclosure Guideline outlines five guiding principles designed to result in transparent, high-quality disclosures that will enable those reviewing the information to better “understand” and “compare” the disclosing life insurer’s business and risks.  According to OSFI, quantitative and qualitative information will “provide stakeholders with a broader picture of the life insurer’s capital and risk position and promote market discipline”.  In brief, the guiding principles require that disclosures must be (1) clear and accessible, (2) meaningful to users, (3) consistent over time, (4) comparable across life insurers (to enable meaningful comparisons), and (5) accompanied by the qualitative narrative (see below).

Quantitative and Qualitative Information

The Disclosure Guideline indicates that OSFI expects LICAT/LIMAT public disclosures to be “tailored to the nature, size and complexity of the insurer”.  However, public disclosures are required to include, at a minimum, quantitative data points outlined in two attached templates – one for Canadian incorporated life insurers (i.e. the LICAT public disclosure requirements) and one for Canadian branches of foreign life insurers (i.e. the LIMAT public disclosure requirements).  The templates are essentially a summary of the applicable capital/asset test that applies to the insurer along with a statement of the applicable minimum ratios required to be maintained (based on OSFI’s requirements) to enable the reader to gauge the insurer’s relative solvency strength.  Although the technical information required as depicted in the templates appears to be summary in nature, it is based on the sophisticated calculations required by the LICAT Guideline.

In addition to the minimum quantitative (technical) information that is required to be set out, the Disclosure Guideline also states that OSFI requires a minimum qualitative narrative that explains the reasons for any material LICAT/LIMAT movements from reporting period to reporting period and any other issues that management considers to be of interest to stakeholders.  Otherwise, the qualitative form of disclosure is “at the insurer’s discretion”. Overall, according to the Disclosure Guideline, quantitative and qualitative disclosures should be designed to provide stakeholders with a better understanding of an insurer’s capital and risk position, and promote market discipline.

Comments From Respondents

One comment made to OSFI during the consultation process that was published in OSFI’s announcement of the Disclosure Guideline suggested that the disclosure requirements are onerous and unwarranted because they are similar to those under Sarbanes-Oxley (SOX) in the United States. OSFI’s response was to underscore that the LICAT public disclosure requirements should be similar to those that apply to financial reporting, and that this is consistent with the disclosure requirements for deposit taking institutions. In addition, in its related Impact Analysis Statement OSFI stated that requiring consistent disclosure of LICAT solvency risk would assist to aid the public’s understanding of insurers’ solvency strength.  Therefore, in addition to resulting in overall transparency, there appears to be an expectation that the general public will be educated in how to evaluate the soundness of life insurance companies through access to the required disclosure.

Another comment made during the consultation process suggested that the disclosure would most likely be lost on the average policyholder due to its complexity, and some simplification was suggested.  OSFI’s reply was that the information is intended to inform stakeholders of the insurer’s business, governance, risk measurement and risk management in order to allow them to make informed decisions about the company.  OSFI’s response to this comment could infer that policyholders should be prepared and responsible to perform their own due diligence, by reviewing the public disclosures, before purchasing a product from a life insurer (or choosing to maintain a product in force).

Conclusion

In some respects, the new public disclosure requirements in the Disclosure Guideline do emulate public company disclosure requirements in the context of the capital markets. And, in many ways, life insurance policyholders are investing in their life insurance company, depending upon the product.  Putting aside the general liquidity issues with respect to life insurance products compared to publicly-traded securities, the new disclosure requirements should benefit policyholders and other stakeholders in assessing the soundness and solvency of their life insurer by giving them a new avenue to review the information disclosed and make an assessment, i.e. in addition to relying upon the rating agencies, or other public disclosure where the life insurer is publicly traded.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

Source: Mondaq

Life insurance company denies claim for infant medivac hero

By  | Global News

A civil lawsuit has been filed in B.C. Supreme Court against a life insurance company which has denied the claim of a deceased veteran B.C. paramedic who co-owned Executive Air Ambulance.

“It’s a very bad denial,” said personal injury lawyer Scott Stanley of Murphy Battista LLP.

For close to 30 years, Matthew Cochlin worked for the BC Ambulance Service as part of the Infant Transport Team, transporting B.C.’s most critically ill babies.

He also co-owned Executive Air Ambulance — a full service air ambulance company.

In August 2016, Cochlin was diagnosed with esophageal cancer. The father of four lost his battle with cancer six months later on December 22, 2016.

He was 54 years old.

“‘It’s going to be OK.’ He died with me saying that,” said his spouse Tania Liemareff.

Months after Cochlin’s death, Liemareff said the life insurance claim was denied.

“You get your life set up the way it’s supposed to be and for it to play out this way, it’s not right,” she said.

Cochlin was a smoker and had a family history of cancer, both of which he disclosed to his life insurance provider — The Co-operators.

He was approved for coverage and paid high premiums, just under $4,000 yearly.

However, after Cochlin’s death, The Co-operators stated it had reviewed Cochlin’s medical records as well as his responses to health questions when he applied for his life insurance coverage.

The life insurance company accused Cochlin of failing to disclose facts that were material to the insurance risk in his telephone interview at the time of application which included seeking medical attention for workplace stress and sleep apnea.

In a statement to Global News, The Co-operators said:

“After a very thorough and careful review, it was determined that Mr. Cochlin did not disclose known facts that affected his insurance risk. For this reason, the policy was deemed void and a refund was issued for the premiums paid.” — Leonard Sharman, The Co-operators.

Stanley disagreed.

“The deceased disclosed quite candidly that he was a smoker and paid presumably the highest premiums because of that. It just doesn’t seem logical,” he said.

Stanley also alleged that, had The Co-operators been aware of Cochlin’s concerns over sleep apnea and work related stress, the life insurance company would have still insured Cochlin at the same premium.

“He was a snorer and he was investigated for that. It was never determined that he had sleep apnea. Even if he did and he had it and he didn’t disclose it, I still say that makes no difference. If you say I’m a smoker and I’m prepared to pay the most expensive insurance so I can have it, it shouldn’t make a difference like they say it should,” Stanley said.

Liemareff said all she can do now is wait patiently to see what the courts decide.

“He dedicated his whole being to making other people’s lives better and now when his kids need something back, it’s so heartbreaking,” she said.

Global News

Canadian Life and Health Insurance Industry Welcomes New Agreement for Trans-Pacific Partnership

The Canadian Life and Health Insurance Association (CLHIA) congratulates the federal government on reaching an agreement to sign the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

“Our industry is a strong supporter of free and transparent trade. This gives us the opportunity to continue to grow as a significant exporter of life and health insurance products and expertise” stated CLHIA President and CEO Stephen Frank. “The CPTPP will permit companies to compete and grow internationally, which will benefit all Canadians,” he emphasized.

Canadian life and health insurers are active in over 20 countries with 3 Canadian companies being amongst the 15 largest in the world. The CPTPP will secure access for Canadian companies to some of the fastest growing markets in the world and will provide strong, transparent rules to govern international trade in the region. The fast-growing economies of the Asia-Pacific region are of particular interest to the life and health insurance sector.

Canadian life and health insurers also hold over $855 billion in assets for their international operations all across the globe. Free trade agreements that reduce barriers to trade and establish fair and transparent rules for Canadian businesses operating in external markets are important to the continuing success and advancement of the industry.

About the CLHIA

The CLHIA is a volunteer association whose member companies account for 99% of Canada’s life and health insurance business. The industry provides a wide range of financial security products such as life insurance, annuities (including RRSPs, RRIFs and pensions) and supplementary health insurance to more than 28 million Canadians. It also holds over $810 billion in assets in Canada and employs nearly 155,000 Canadians.

SOURCE Canadian Life and Health Insurance Association Inc.

Manulife Becomes First CDN Insurer Offering All Group Claims Submissions Through Online, Mobile

Manulife today announced an enhanced plan member experience designed for greater convenience. Users can now submit any Group Benefits claims, including disability claims, using the channel most convenient for them through Manulife’s new Group Benefits homepage and mobile app.

“The newly designed plan member homepage brings the most important information to the forefront, where plan members can easily and efficiently transact with Manulife in the way they want to,” said Donna Carbell, Senior Vice President, Group Benefits at Manulife. “The Manulife Mobile app and new homepage are important steps in the digital evolution of the customer experience that make the process easier and save members time so they can focus on the things that are important to them.”

Manulife Mobile uses fingerprint recognition and is available now for iPhone and Android devices. It allows users to:

  • Submit any type of Group Benefits claims
  • Review recent claims and payment information
  • Sign-in with fingerprint access or with their username and password
  • See their benefit balances and access their benefits card
  • Find health care providers in their area
  • Search My drug plan to find the lowest cost alternative drugs; and
  • Find places to get their prescriptions for less with Pharmacy savings search

The Manulife Mobile app is also available to Group Retirement Solutions (GRS) plan members who can:

  • Check account balances and investment mix
  • Review their transactions
  • View all contributions made to their plan
  • See their rates of return
  • Use calculators and learning tools to help them plan and increase their financial knowledge

“Manulife set out to develop a digital experience that not only makes people’s lives easier, but also delivers value for plan sponsors,” added Carbell. “This new solution will help maintain a productive workforce and keep their employees happy. It’s one more way Manulife is committed to putting customers first.”

About Manulife

Manulife Financial Corporation is a leading international financial services group that helps people achieve their dreams and aspirations by putting customers’ needs first and providing the right advice and solutions. We operate as John Hancock in the United States and Manulife elsewhere. We provide financial advice, insurance, as well as wealth and asset management solutions for individuals, groups and institutions. At the end of 2016, we had approximately 35,000 employees, 70,000 agents, and thousands of distribution partners, serving more than 22 million customers. As of June 30, 2017, we had over $1 trillion (US$780 billion) in assets under management and administration, and in the previous 12 months we made $26.7 billion in payments to our customers. Our principal operations are in AsiaCanada and the United States where we have served customers for more than 100 years. With our global headquarters in Toronto, Canada, we trade as ‘MFC’ on the TorontoNew York, and the Philippine stock exchanges and under ‘945’ in Hong Kong.

SOURCE Manulife Financial Corporation

OmbudService for Life & Health Insurance reports on record numbers

 Canada’s OmbudService for Life & Health Insurance (OLHI) held its annual general meeting and released its annual report for 2016/17, reporting on a year of record numbers and renewed priorities.

Highlights:

  • Complaint volumes increase by 23.2% across Canada, marking a historic high
  • Increase in complaints from Quebec (+36.2%), Prairie provinces (+25.6%) and British Columbia (+ 24.4%)
  • Public contacts exceed 87,000
  • Edmonton office established as a part of western expansion strategy

“We discovered many things about ourselves this past year: we are small yet influential; we are experts in our field; we are strategic; and we are ready to redefine our future,” said Chair Dr. Janice MacKinnon at the meeting on September 14, 2017. “The launch of OLHI’s new case management and reporting system (CMRS) and website provides us with an opportunity to take a fresh look at how we do business today and moving forward.”

Among OLHI’s business plans for the future is increasing visibility outside Central Canada. This past year, complaint volumes rose in ManitobaSaskatchewanAlberta and British Columbia. To build on this momentum, OLHI established a physical presence in Edmonton in Q4 with a new office.

For fiscal 2016/17, OLHI received 2,632 complaints, with 57.5% of these relating to denied claims. Disability, life and employee healthcare & dental, together, made up 83.9% of all product complaints. Web visits rose by 19.1% over last year, reaching nearly 85,000.

“OLHI is successful because of stakeholder support and the respect we receive as an independent, impartial organization,” said Brigitte Kent, Acting Executive Director. “This allows us to meet our benchmark of closing 80% of all complaints within 120 days.”

Looking ahead, OLHI will continue to measure effectiveness and efficiency, identifying best ways to utilize the CMRS and accelerate service without sacrificing quality. OLHI will also complete its third Independent Review and begin work on ensuing recommendations.

For more detail on OLHI’s operations, including case studies and statistics, the full 2016/2017 Annual Report is available at http://olhi.ca/news-publications/annual-report/.

About the OmbudService for Life & Health Insurance
The OmbudService for Life & Health Insurance (OLHI) is Canada’s only independent complaint resolution service for consumers of Canadian life and health insurance. Canadians trust OLHI to review their insurance complaints about life, disability, employee health benefits, travel, and insurance investment products such as annuities and segregated funds. OLHI’s free bilingual services are available to any consumer whose insurance company is an OLHI member – and, currently, 99% of Canadian life and health insurers are. OLHI also offers general information online about life and health insurance. To ensure impartiality, OLHI’s operations are overseen by the Canadian Council of Insurance Regulators (CCIR). For more information, visit www.olhi.ca.

SOURCE OmbudService for Life & Health Insurance

Life insurance: the ultimate in financial #adulting?

Life insurance: the ultimate in financial #adulting?

Millennials have plenty to worry about when it comes to financial #adulting. From paying off student debt and managing day-to-day expenses to buying a house and starting a family, these new financial responsibilities can be overwhelming.

A recent survey by TD revealed another gap in millennials’ financial picture: life insurance. According to the survey, more than half (55%) of millennials do not have any life insurance, although one-third have thought about it, particularly when it comes to ensuring their loved ones are taken care of should the worst happen.

“As millennials are in the midst of this new life stage, it’s clear that they want to protect their families and loved ones,” says Mark Hardy, Senior Manager of Direct Life & Health, TD Insurance. “But with so many other financial responsibilities it can be daunting to know where to start.”

The survey revealed that these other financial priorities, including paying down their debt (25%) and saving for a house (21%), were much higher on the ‘to do’ list with life insurance lowest on the list.

While millennials said the top barrier to purchasing life insurance was the cost (55%), more than a third (37%) said they haven’t purchased life insurance because they don’t have any dependents.

“There’s no doubt that getting married or becoming a parent is a key life event when people realize the importance of having life insurance,” adds Hardy. “Less understood is that the younger you are when you buy life insurance, the less you’ll pay for your coverage and your premiums will not increase for the term you choose.”

What millennials might also find surprising is that the cost of life insurance breaks down to less than a cup of coffee a day, over a 10-year period.

“For folks starting a family – or those who already have young families or dependents – who don’t yet have life insurance, now is the time to make it a priority because this is the period when your financial obligations are really growing and you need that peace of mind,” says Hardy.

The survey also revealed that while most millennials said that life insurance is best to cover one-time costs, such as funerals (68%), many don’t realize that it can assist with so much more. Day-to-day living expenses, mortgage payments, lost income, and student loans are all areas where having life insurance can help relieve the financial pressure on those left behind.

Figuring out how much life insurance one needs is also easy with TD’s Right Fit Coverage Assessment tool.

“Before making any decisions about life insurance, it’s important to start by researching your options and speaking to an insurance advisor to learn what insurance will best fit your unique situation,” says Hardy. “That way you can be assured peace of mind for you and your family.”

About the TD Survey

Results are based on an online survey of 1,000 Canadian adults (aged 18yrs+), conducted May 8 – 12, 2017, by Environics Research Group.

About TD Insurance

TD Insurance offers a wide range of products to help protect customers including credit protection, auto, home, health, life, and travel insurance. With more than 4.5 million customers, TD Insurance authorized products and services are available through a network of more than 1,150 TD Canada Trust branches, the Internet, and telephone. TD Insurance represents all of the personal lines insurance entities within TD Bank Group. For more information, visit www.tdinsurance.com.

SOURCE TD Bank Group

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